Vitrolife AB
STO:VITR
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
American Express Co
NYSE:AXP
|
Financial Services
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Target Corp
NYSE:TGT
|
Retail
|
|
US |
Walt Disney Co
NYSE:DIS
|
Media
|
|
US |
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
156.6
265.6
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Estee Lauder Companies Inc
NYSE:EL
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Church & Dwight Co Inc
NYSE:CHD
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
American Express Co
NYSE:AXP
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Target Corp
NYSE:TGT
|
US | |
Walt Disney Co
NYSE:DIS
|
US | |
Mueller Industries Inc
NYSE:MLI
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Ladies and gentlemen, thank you for standing by. And welcome to the Vitrolife Interim Report January to March 2020 Conference Call. [Operator Instructions] I also must advise you that this conference is being recorded today. And I would now like to hand the conference over to your first speaker today, Thomas Axelsson. Thank you. Please go ahead, sir.
Thank you very much, John, and good morning all to you. And welcome to Vitrolife Interim Report January-March 2020. The speakers from today is Mikael Engblom, the CFO of the company; and myself, Thomas Axelsson, the CEO. Please change page and go to #2 and have a quick introduction of the quarter. We had good growth within the quarter, but uncertainty came at the end of the quarter due to the COVID-19. I will try during this presentation together with Mikael to explain the situation and also what we could maybe expect during quarter 2. Sales in Q1 was SEK 334 million, and that's a growth of 7%. In local currency, and also that's the same as our organic growth, was 5%. Our EBITDA was a margin of 35%, and it was SEK 116 million. We also, as I said, will cover at -- after the end of the period. After the closing day, we can see that we have a larger impact from the COVID-19. So we will go through that and see it on the second quarter. We have also -- or the Board of Directors has decided to postpone the Annual General Meeting and a new date will be later announced. So by that very, very quick summary, let's go to Page #3 and see what happened during the quarter. As I mentioned, I'm quite satisfied with Q1. It was a quarter of good growth, if I take away China. Why I say like that is that it was a good growth in all regions. We had growth except the China, Asia region. To explain more about the regions and what happened, I would like to start from Americas. It was a growth of 7% and the growth in that region is showing the kind of pattern we have had for about a little more than a year, and that is growth within Time-lapse and also -- in the last year for the Genomics business. The business in that territory did go very well and had good growth up until the time when American Society for Reproduction Medicine, ASRM, came out with some guidelines. Coming back to that later on. The same for the next region, EMEA region. We were selling for SEK 156 million, and we had growth in all divisions, which is very, very good. The total growth was 17%. So definitely more than the market growth. We saw some impact at the end of the quarter that we also went out and told the market about. And I will also later on explain what's going on within that region from the guidelines from ESHRE. Then the region that we knew in the middle or, let's say, late January, from beginning of February that they were closing down, China. And that meant that the growth in China was negative or in Asia was minus 22%. What -- it was not only an impact on the Chinese. It was also an impact on the region itself, in Southeast Asia, means Thailand, Vietnam and those territory because part of their, let's say, IVF industry is by Chinese that is also going there for doing their treatment. So Korea, Taiwan, China and Thailand, those had a very tough quarter where more or less, at least in China, all of the businesses end, was stopped from the end of January. We are seeing some light in the tunnel, and I will come back to that later, too, when I explain about the guidelines. And then finally, the region Japan-Pacific. It is a mix there. It is a good growth. It's 14%, and it's growth within consumables and technology. And there, it is mainly Japan that has had a good, good growth.By that, let's go over to Page #4 and see about the divisions. When we are talking about the business in the way that we are measuring and following the business, it is within these 3 divisions. It is within Genomics, technology and consumables. We changed that last year internally, and we are also right that we're changing that in our reporting systems. So consumables. You that's been following the company are -- the business in Media and also Disposable Devices and technology are Time-lapse and business unit are. Genomics is the -- embryo testing with Genomic fields -- field. So let's start from the bottom. And we had a sale of SEK 193 million for the consumables. And the negative growth of minus 5% can all be -- the decline is coming from this Asia, China situation then.Technology, good growth, plus 19%. And on that side, it is a continued good growth of Time-lapse.The Genomics, the growth there was 52%, and it is a little bit unfair to just say, 52%, but the reason was that is so good growth due to that we started up the Genomics business 2019 first quarter. So it was a slow start, but still good, good number. And sales was SEK 32 million. What I would like to do right now is that you change the page and you go to Page #5. Because all of this, when I talk about the territories and what goes on, I do think it can be good for all of us to know a little bit about what are the regional guidelines and regulations currently under the COVID-19 pandemic. So after the closing date, we've seen a clear trend on negative sales. And for the first week in April, the sales is around 1/3 compared to previous year. Is it going to continue or not? That's something that Mikael and I will try to explain how it looks like. So what I will do is to see what are the restrictions, and we can start from the ASRM, or the American Society for Reproductive Medicine. They were coming out with guidelines March 13 and then also April 13. So what are they saying? The current recommendations that they are having then for U.S. is that they should suspend all the initiations of new treatment cycles, and that including retrievals and frozen embryo transfers. They are also strongly recommending that the clinics should consider cancellation of all embryo transfers and that they should have minimize the in-person interactions. So by that kind of guideline, there are uncertainties right now regarding the business. If we then will continue from U.S. going to Europe. And I can say directly then that the Canadian Fertility & Andrology association are very similar to the one in U.S. So let's go to Europe then, ESHRE. The last update from ESHRE was in April, and ESHRE are advising the clinics that they should not start any new cycles. And for those patients that already have started the assisted reproduction treatment, the suggestion is that they should not do transfer, they should then just do vitrification of the oocytes or embryos for -- when they open up the market. Within Europe, there is also, of course, the British, the human fertility and andrology authority. They came up with recommendations from -- also on April 15 that no new treatment should be started with immediate effect then. And we continue then towards the East, it is the Australian organization that on March 25 and also on April 2 did some guidance that they should not initiate new cycles.So that was a lot of negative things. What's positive right now is that we can see that they are opening up some of the markets. The Australian government made a decision yesterday to lift the suspension on IVF. So clinics yesterday or actually today, then have come out with information that they are opening up the clinics. And then we'll, of course, then following the normal pattern and be extra careful regarding the risk of having any infection.The positive then is that China was the first one, as you know, to close down. They were also the first one to open up the business. We can see that clinics after clinics are opening up, and a good qualified estimate is that the China IVF market is currently up running at around 50% on normal business. But it takes time to open up the business.From Vitrolife side, you know that we are not selling hormones. We are within the laboratory business. There is a delay from the time when you start to do hormones stimulation up to the time when you do them, also to pick up and you start embryo culturing. That is around 4 weeks.So there are some light within the tunnel. And by that, I would like to hand over to Mikael. So please change page, Mikael.
Thank you. I will take you through the key financials during the first quarter. And if we start with the gross margin, it was 62% compared to 63% during the first quarter last year. And the variance then is that the margin was positively impacted by currency and by reduced amortization. However, the margin was negatively impacted by scrapping costs, both related to the quarter and then some provisions for the second quarter following expectations of lower sales. And the margin was also negatively impacted by product mix, basically that we were selling less share of Media and higher share of Genomics. Looking at the EBITDA margin then, it was 35% compared to 40% in the same quarter last year. And the variance was both due to the gross margin variance that I just mentioned, and also that we had higher operating cost in relation to sales during the first quarter this year. The reason for that was that we have been strengthening the sales and marketing organization during the year. And due to that, the sales growth was not as high this quarter as the increase in cost. You get the effect that the marketing and sales cost as a percentage of sales increase.We have also strengthened the R&D department, amongst others, through more research collaborations and you get the same effect there as with the marketing and sales. In addition to this, we recorded a SEK 3 million provision for bad debt in relation to a potential customer loss. So all in all, declined from 40% to 35%. Net debt in relation to EBITDA was minus 1.2. So we end the first quarter with about SEK 715 million from the bank with no financial loans. So with that, move to Page #7 then for the long-term outlook. So we continue to see a long-term growth of 5% to 10% in monetary terms. As before, we will continue to focus on sales expansion. So for example, through the strengthening of the marketing and support organization. And we will continue to focus on broadening the product offering, both through development, which we are continuing at full pace at the moment and through acquisitions, which we have financial resources to conflict. So with that, operator, we are ready for questions.
[Operator Instructions] And we now have our first question, and this comes from the line of Björn Olander.
Björn Olander, Murgata Equity Research. Good with the overview of the sort of recovery and all the different measures taken in different regions. Very encouraging that China opens up and is at 50%. That's quite impressive, I would say. Japan seemed to be not very affected at all. What is the reason for that? And do you think that they sort of still will be -- I mean, not affected at all? Or do they sort of considering shutting down? What is your view on that?
Björn, yes, Japan -- good, good question because Japan is a tricky one. What we can see is that the Japanese clinics are still up running, and they are -- their ambition to continue to do it. The kind of restrictions that are on the Japanese market right now, is not impacting at all the IVF business. But you know that I have to be very careful because it can change. So what we are seeing is that they are running at the clinics as usually. There are maybe few, few less visits by couples. But otherwise, we see a very normal business in Japan. If you compare then the Japan-Pacific, that is one of our regions that we are communicating both then. In Australia, as I said, there has been a lockdown where they currently is opening up the market again.
So I mean, who knows what will happen with the COVID-19 and when everything will return to normal? I guess it will take some time. But it seems like the sort of shutdowns that we have seen from ESHRE and also in the U.S. I mean, it can't be that much worse. So the question is more, when it will become better? And it seems like there are some signs of sort of improvements during Q2, I think, opening up clinics, as you mentioned, and so on. What is your sort of best guess? Is it -- would it bottom out during the second quarter or perhaps the third quarter? Or I mean, on a general scale or, if you like, on a regional basis. I mean there is no way out from this current situation.
Björn, best guess today is very difficult. What I can inform about is just the current situation where you started with a question regarding Japan, and that's as normal as it can be. There has been reactions on the Australian market, and that's why they have decided to open it up then. If we can see in U.S. then the ASRM, when ASRM was going out with this kind of guidelines, there was a reaction. It was a very reaction within the clinics. They thought it was too tough. So the clinics in the U.S. has not completely shut down. I mean, there is some clinics that are still doing it. And it seems like they are opening it up a little bit slow. So there is more regarding, let's say, of carefulness within Europe right now. I mean we all know what's going on in Germany, Spain, et cetera. So you asked for best guess from some of that is within the business. Yes, U.S. will hopefully opening up slowly but in a positive trend. Europe is going to be market-by-market, more or less. And we can see that some of the markets in Europe are opening up. Czechia, for instance. But there's still, as you're aware of, the situation in Spain, where there's a lockdown more or less. But this can't be forever. It can't be forever, Björn.
Got you. I mean, in a way, the clinics own organization that recommends them to shut down, so it's a bit of a tricky situation. And then that leads me to the next question. The -- many of the clinics are suffering, especially that many are private currently held and so on. And I assume there are major financial distress on many of those. What would you think will happen to -- I mean, would this change the market structure in terms of, I mean, fewer small clinics and more larger chains? Or will it in any way sort of change that dynamic, do you think? And also, is there something you can do to sort of help your best customers in this situation?
First, what's going to happen long term, no one can say. We are not seeing currently that it is -- has started to be any kind of consolidation due to that clinic or some kind of financial difficulty. The situation currently is that most clinics are then doing internal trainings and are preparing for the time when they can go into, let's say, normal business again. We are virtualized. We have a good financial situation. And we are, of course, trying to use this unfortunately situation for customer, but to help them, so strengthen up our relationship and help them to get through the worst time if we have a possibility to do it. One thing that we are doing and what the clinics are doing is that a lot of web-based training and sessions are going on. So there is a mix between training, education, support in that way and not so many, but there are a few discussions regarding delay payments.
Yes. I assume. So -- and that leads me to my final question. I mean, you mentioned you have a strong cash position and there may be consolidations. You mentioned that you might considering acquisitions and so on in this environment, if that -- if opportunities arise. Could you comment anything on what would be particularly interesting right now? Or what will be more sort of open for those kinds of discussions right now?
It's only gone a couple of weeks to a month, more or less. So there is not really any one of our competitors that is coming to a situation where they're saying, "Please come out and buy us." However, I can say that some discussions are already -- if you have had a discussion for a long, long time, there is an opportunity to maybe reconsider those discussions. And that's a normal thing during M&A. You start to know each other and you don't really know when you will be taken. But we are ready for it, and our business development department are working quite heavily with looking into some prospects.
And that can be both new technology and also distributors and things like that?
Whatever makes sense from us and we can use our strength right now, we are going to use that strength.
And your next question comes from the line of Patrik Ling. Okay. We have no response. We'll move to our next -- Hello, Patrik Ling, your line is now open.
Can you hear me? Hello?
I can hear you, Patrik.
Yes, you can hear me. Good, good. If we start with consumables, sales were down 5%. And maybe if you could help us by -- since you have changed your reporting structure, if you can just give us some flavor for how that would have been between Media and Disposable Devices?
Yes. I can answer that, Patrik. And we've seen a larger decline in the Media side than in the Disposable Devices. And it's really due to that we have a higher portion of sales from Media than Disposable Devices in the region that was impacted earliest by the COVID-19, so China. So it's a larger decline in China than it was -- sorry, in the Media than it was in the Disposable Devices.
Is there a decline at all in Disposable Devices?
There is a small decline.
Okay, right. Because if I remember correctly, from fourth quarter, you had some challenges, especially in China in the fourth quarter to win back sales that you had or customers that you had lost during your delivery services. Maybe you can update us a little bit on how that process has developed or if that is sort of irrelevant question given what's going on in China.
Okay. Patrik, Thomas here. I'll see if I can handle more like a sales-oriented question. As you said, it -- we had a challenge to convince the customers that they should do short-term switch back to our products before we got the new registration. The new registrations, I think we have communicated, those are in place. The situation right now is, as you know, that China are -- in Q1, they've hardly done any cycles, and they are starting to pick up those cycles. And I am positive that we have some associate. It's too early to say because the numbers are not big enough, but I am quite positive and we can see that from our interactions that it is a good way for them, when they are starting up, that they're also starting up with Media that they prefer to use, if I put it that way.
But in the current situation, I mean, do your sales guys even have a possibility to go out and meet clients in the long term especially?
No, they can't go out and meet them the traditional way being there, but we can send products. And you know that they've been using a similar product. So there isn't any larger problem for them to actually transform to the products. And since they're anyhow starting up and they need to order new products for the inventory, et cetera. It is a -- I'd say, it is a restart within the Chinese market right now. And if they have had any media on the shelf, it is going to be scrapped for that because it's too old.
Could I also ask, when you said that sort of the first weeks here in April that when you compare what is happening right now in the beginning of the second quarter that you see sales at a level of approximately 1/3 of what it was last year. The same period last year, could you just remind me if there were anything special happening? Was sales extra good or extra bad? I mean, how is the comparison...
No, no. I mean...
Was it in normal period?
Yes. It's normal period. It's just the situation where no procedure more or less is being done in Europe. They've said in U.S., be careful, don't do anything if you don't need to do it. The business has been running more or less normally in Japan. We can see slowly pickup in China, Thailand and those market doesn't exist yet because they are behind the China market. So there is just no demand.
Could I also ask -- maybe this is a question for Mikael. I mean you talked about that you had taken some scrapping costs in the gross margin here in Q1. Could you quantify that? Maybe I missed that on the presentation.
Yes. It was in the region of SEK 7 million, SEK 8 million in total in the first quarter. And where of some of that was provisions for scrapping that we expect in the second quarter.
Okay. Okay. And when it comes to the bad debt that you talked about, around SEK 3 million, was that only for Q1? Or did you do a -- so did with the scrapping cost that maybe you took some provisions for things that you see might be coming in the second quarter?
No, that was just for Q1, and it was not corona-related.
No, okay, okay. So have you seen any signs that there might be bad debts that are corona-related going forward. I mean you talked about that you were in discussions about maybe extending payment periods and stuff like that.
Yes. I mean we have not seen any signs of customers not being able to pay us. We are seeing some discussions about temporarily longer payment terms with some customers, but we have not concluded that. We believe that they will not be able to pay us eventually. So no indications of write-downs, even though there are some discussions on prolonged payment times.
Could you just -- I mean, when we look at the situation in Europe, where some countries like Italy and France and Spain is virtually in complete lockdown right now. Do you have a feeling for what type of staying power the clinics have actually if they basically stop all their operations? I mean, how long can this situation go on without smaller clinics going bankrupt?
No. I mean it differs from clinic to clinic. If you talk about Europe, some of the clinics in Europe are public, I mean, related to public health care. Those clinics has been forced to stop. So the people that are working there should be working within the demand that they have in other specialties within the hospitals. But otherwise, the private clinics, there -- we have not seen any of those signs right now. If it would take a long, long time to get out of this, then, of course, we will see. But situation is that most clinics are profitable. And I don't think they will be in any bankruptcy, at least we have not heard anything in that kind of direction. It's only what Mikael said that a couple of them that has bought technology would like to delay the payment of month or so.
Okay. And I suppose that -- I mean, publicly funded clinics are significantly better. But this was so -- so do you have a feeling for, if you look at Europe, for example, how large proportion of the clinics or the cycles that are done in publicly funded clinics versus privately funded clinics?
In Europe, around 25 -- 20 -- it depends upon how wide you do Europe. But let's call it Western Europe then, around 20%.
Of cycles are done in publicly funded clinics?
Yes. Yes. 20%, 25% depending upon where you cut the cake.
And we have another question, sir, the last question. This comes from the line of Daniel Albin.
So I just have a question on Time-lapse. And I know that you earlier have spoken a bit about that you are planning to launch a software in this field, the IV software. And I'm just wondering if you could update us on that time line.
Yes. We -- if you go on our web page, we have already informed that on Saturday this week we will do a pre-launch and explanation regarding the -- that IDA score. IDA score is one of our artificial intelligence software to improve the outcome of Time-lapse. So you're more than welcome. You can go up on our web page. You can see a link and you can click there, and you can also attend one of the first web meetings, larger congresses that's going to be web based from this weekend.
No further questions have come through, sir. You may continue.
It's pleasant situations. Thank you very much for the question, and thank you very much for listening in. And by that, this meeting is then ended for today. Thank you.
Thank you. That concludes our conference for today. Thank you all for participating. You may now disconnect. Speakers, please stand by.